Windicator: Record additions in 2012

The year 2012 ended with 271GW of operational wind -- more than 51GW, or 23%, higher than a year earlier, and the highest yearly build figure ever recorded.

The five-year compound annual growth rate is 23%. If the five-year trend continues, then capacity at the end of this year would be around 350GW.

European wind continued to develop rapidly in 2012, adding 13.8GW, or 14%. Europe's star performer - in terms of megawatts added - was the UK, which increased its capacity by 2.52GW, or 42%. The only countries to add more were China (15.8GW), and the US (15.3GW). The electricity-generating capacity of the world's wind is now roughly equal to the electricity demand in France and more than the demand in Brazil.

The US added more capacity than Europe. According to the American Wind Energy Association, wind became the top source of new US generation capacity for the first time in 2012, comprising about 42% of all new power generation capacity. Renewables as a whole accounted for more than 55% of all new US generating capacity, says the association. Performance in Canada was also strong, albeit from a lower base.

In South America, the long-awaited surge in Brazil almost doubled capacity there, to 2.5GW. Mexico more than doubled its capacity, but from a lower base. In Asia, China surged ahead as strongly as ever. Some reports present a higher figure for installed capacity than we do. Our statistic comes from the State Electricity Regulatory Commission, as noted last month, reflecting only capacity that is grid connected.

Elsewhere, progress in Africa and Australasia continues to be sluggish. India, where progress in the past has been rapid, seems to have slowed in relative terms. India's stagnation followed the withdrawal of two policies critical for wind: the generation-based incentive aimed at encouraging efficient wind-farm development with mandated payments for megawatt hours generated, and the accelerated depreciation tax write-off. Bowing to intense lobbying from the wind industry, however, the government in February brought back the generation-based incentive, although the government has not yet announced the new rate.

The offshore market is still moving fairly slowly, with the exception of the UK, where more than 1GW was commissioned in 2012, taking capacity to 2.7GW. Progress there is likely to continue at a steady pace. The other European centre where significant offshore developments are anticipated is Germany, and progress there will accelerate once logistical issues associated with grid connections are resolved.

Looking ahead

There are conflicting signals about prospects for growth in 2013. On the positive side, the competitive position of wind continues to strengthen. Although the price of oil is about 15% below its level in the spring of 2012, American natural gas prices are about 25% higher than their spring 2012 level. European natural gas prices are well over double American levels - and likely to stay that way. Elsewhere in the world, gas prices are also high, and according to a recent report from Bloomberg New Energy Finance wind is cheaper than either gas or coal-fired generation in Australia. Nuclear generation costs continue to be shrouded in uncertainty. The latest twist in the protracted saga of negotiations in the UK is a suggestion that nuclear contracts might run for 40 years rather than 20. This would result in lower yearly loan repayments for the developer, in turn lowering electricity costs passed to the consumer. These negotiations are between utility EDF Energy - the only serious contender to build the first of the new nuclear power stations - and the UK government. Rumours suggest that the so-called strike price will be upwards of £100/MWh (EUR 115/MWh). This would confirm that nuclear generation costs more than onshore wind, currently at about £80/MWh in the UK.

Make Consulting estimates that the average world levelised cost of energy for onshore wind is on average only 10% above grid parity, and that onshore wind power will be at or below grid parity in all key regions by 2015. Make estimates that even offshore wind power will be at or below grid parity by the middle of the next decade.

Stiffer competition

But on the negative side, the production tax credit in the US has only been renewed for a year, and Bloomberg New Energy Finance suggests that only a modest amount of capacity will be built in the country. However, progress in neighbouring Canada seems likely to continue and there are also a number of projects in the pipeline in Brazil and elsewhere in South America. The UK seems likely to continue its strong growth, and that includes further developments offshore.

In Europe as a whole, if around 14GW of new capacity is added this year, as last year, then the EU target of 205GW by 2020 should be achievable. A new entrant to the wind-power scene is Saudi Arabia, where plans have recently been announced for 1.7GW of wind, but progress in Africa seems unlikely to take off in the near future.

Although the competitive position of wind relative to all the thermal sources of electricity generation, including nuclear, is improving, photovoltaics (PV) continues to strengthen its position. Worldwide photovoltaic installations in 2012 amounted to about 30GW - nearly 60% of the added wind capacity. Colorado-based think tank the Rocky Mountain Institute expects that figure to increase to 50GW by 2015.

As costs continue to fall PV appears, on the surface, to be challenging wind on an installed-cost basis. PV load factors, however, are typically only half that of wind and so wind will continue to hold the competitive edge.

But the absence of moving parts and the ease of maintenance is likely to make PV an attractive proposition in the developing world, making market forecasts an interesting exercise indeed.

The quarterly Windicator is an indicator of the state of play. Changes in the table can be corrections received rather than additions or subtractions. We welcome corrections.

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